Note with Fair Value Not Equal to Cash Consideration

question 79

Essay

Note with fair value not equal to cash consideration
On January 1, 2020, Cameroon Corp. lent $50,000 to its CEO, interest-free. The loan is repayable in full in five years. The market rate for similar loans (with similar credit risk) is 4%.
Instructions
a)Calculate the present value (fair value) of this loan (round to the nearest dollar). Why is it not the same as the actual cash advanced?
b)Prepare the journal entry to record this transaction.

Analyze trends in per capita water and energy use in the United States.

Understand the role of renewable energy sources in U.S. electricity generation.

Comprehend the factors influencing world population projections.

Grasp the principle of energy demand variability.

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Definitions:

Cash Flow

The full extent of monetary movement into and out of a commercial entity, affecting its capacity to liquidate quickly.

Stockholders

Individuals or entities that own shares in a corporation, holding a stake in the company's equity.

Operating Cash Flow

Refers to the amount of cash generated by a company's normal business operations.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing the asset's consumption or wear and tear over time.